DarioHealth Reports Fourth Quarter and Year End 2019 Results

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Mar 17, 2020, 06:30 ET

NEW YORK, March 17, 2020 /PRNewswire/ -- DarioHealth Corp. (Nasdaq: DRIO), a global digital therapeutics (DTx) innovator, today reported financial results for the fourth quarter and full year ended December 31, 2019 and provided a corporate and commercial update.

Transformed the business into a software as a service (SAAS)-based membership model with recurring revenues and potential for high margin profile
Opened multiple channels within the business-to-business-to-consumer (B2B2C) marketplace laying the foundation for potential future growth with expected lower customer acquisition costs
Produced additional strong clinical data adding to the body of evidence that suggest best-in-class health outcomes
Extended platform functionality to treat hypertension, a potential large market opportunity
Raised $20.4 million in equity to fund growth initiatives
Dario's remote monitoring platform well positioned to allow patients to maintain social distancing imposed by the COVID-19
Company to Host Conference Call and Webcast 8:30 am EDT Today

"2019 was a productive and successful year for Dario on multiple fronts, as we lay the foundation for operational and financial execution in 2020 and beyond. The Dario platform continued to produce meaningful clinical data that we believe highlights its ability to positively modify user behavior with the goal of better managing chronic conditions for improved health outcomes," said Erez Raphael, DarioHealth's Chief Executive Officer. "While we are early in our commercial launch, we believe our strong user engagement and clinical data position Dario to be a market leading product. With clinical data and capital in hand, and our belief that we are a novel and innovative company in the DTx industry, our primary focus shifts to making the necessary investments to expand our SAAS based membership model into our B2B2C service offering. We believe that this approach is already reflected in the improved gross profits in the second half of 2019, and is expected to provide broader patient adoption, more predictable revenue streams, lower customer acquisition costs and higher gross margins. We are assembling a best in class management team to support these initiatives and have attracted executive commercial talent with relevant experience to take our platform to the next level. We are excited about our prospects in 2020, where we intend to continue implementing our disruptive DTx capabilities and working with additional healthcare providers and payers, and look forward to sharing additional, positive developments in the coming weeks."

Zvi Ben-David, Dario's Chief Financial Officer, Secretary and Treasurer added, "Although this transformation of Dario is still ongoing, the most recent financial results show encouraging signs of a positive impact. Revenues derived from membership (SaaS sales) increased from $562,000 in 2018 to $2.9 million in 2019. Gross profit improved from 13% in Q4 2018 to 46.7% in Q4 2019. We also strengthened our balance sheet with a successful financing in 2019, supplying us with what we believe to be the necessary capital to execute on our strategy and providing cash runway into 2021."

Business Update and 4Q 2019 and Recent Highlights

Opening B2B2C Channels: Commercial Development & Strategic Collaborations

Established more partnerships in multiple channels: retailers, self-insured employers, healthcare providers (including chronic condition management companies) and insurers.
Launched online membership offering "Membership-in-a-Box" (MIB) package, designed to reach consumers with chronic conditions such as diabetes who shop at retail stores such as Best Buy and other retail chains.
Launched the Dario-powered digital diabetes program on Walmart.com.
Launched digital therapeutics solution for managing chronic diseases such as diabetes and hypertension on Albertsons Marketplace.
Partnered with Aerami Therapeutics (formerly Dance Biopharm), highlighting how our offering can be paired with devices/therapeutics to enhance patient care.

Clinical Evidence Development

Demonstrated efficacy across many key diabetes metrics through patient use of Dario's platform technology.
Presented new clinical study outcomes at the Advanced Technologies & Treatments for Diabetes conference, which showed significant reductions of both hypoglycemic and high glycemic events in people with type 1 and insulin dependent type 2 diabetes using Dario's digital therapeutics platform.
Presented new clinical data at the 19th Annual Diabetes Technology Meeting conference, which showed improvements in average blood glucose levels (BGavg) and in-range measurements in diabetic patients using Dario's digital therapeutics platform and dedicated one-on-one personal health coaching.
Presented data at the American Diabetes Association's Scientific Sessions, which showed how behavioral change achieved with Dario's mobile applications can improve glycemic outcomes sustained for a long period of time.

Management and Board Appointments

Strengthened management team with appointment of digital health veteran Richard Anderson as President and General Manager, North America, who will utilize his commercial experience with payers and self-insured employers to drive growth in the B2B2C strategy (January 2020).
Appointed digital therapeutics pioneer Dr. Abigail Hirsch to the Company's Advisory Board to support commercial strategy and execution (October 2019).
Appointed Yadin Shemmer and Adam K. Stern as new board members (March 2020).

Fourth Quarter 2019 Results Summary

Revenues for the fourth quarter ended December 31, 2019 were $1.8 million, a 3.7% sequential decrease from third quarter ended September 30, 2019, and a 5.8% increase from the $1.7 million in the fourth quarter ended December 31, 2018.

Revenues generated during the fourth quarter and year ended December 31, 2019 were derived mainly from the sales of DarioHealth's components and from the offering of our membership plans to our customers in the U.S.

Gross profit in the fourth quarter of 2019 was $840,000, an increase of $617,000, or 277%, compared to gross profit of $223,000 in the fourth quarter of 2018. Gross profit as a percentage of revenues increased from 13.1% in the fourth quarter of 2018 to 46.7% in the fourth quarter of 2019. The increase was mainly due to the increase in revenues generated from our membership plans.

Total operating expenses for the fourth quarter of 2019 were $5 million compared with $5.15 million for the fourth quarter of 2018.

Operating loss for the fourth quarter of 2019 was $4.2 million, a decrease of $745,000 compared to the $4.9 million operating loss in the fourth quarter of 2018. This decrease was mainly due to the increase in our gross profit.

Net loss attributable to holders of common stock was $4.17 million in the fourth quarter of 2019, a decrease of $810,000 to compared to the $5.0 million net loss in the fourth quarter of 2018.

Cash and cash equivalents totaled $20.4 million at December 31, 2019.

Non-GAAP billings for the three months ended December 31, 2019 were $1.71 million, a 16.6% decrease from $2.05 million reported in the three months ended December 31, 2018. The decrease is a result of the decrease in our digital marketing expenses in the three months ended December 31, 2019 compared to the three months ended December 31, 2018.

A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Full Year 2019 Results Summary

For the twelve months ended December 31, 2019, revenues were $7.56 million, a 2.2% increase from revenues of $7.4 million for the twelve months ended December 31, 2018.

We recorded an additional $487,000 as deferred revenues from revenues generated from our new membership offering to our customers in the U.S.

Gross profit was $2.6 million in the twelve months ended December 31, 2019, an increase of $832,000, or 47%, from $1.8 million gross profit recorded in the twelve months ended December 31, 2018. Gross profit as percentage of revenues increased from 23.9% in the twelve months ended December 31, 2018 to 34.4% in the twelve months ended December 31, 2019. The increase is mainly due to the increase in revenues generated from our membership plans.

Total operating expenses for the year ended December 31, 2019 were $20.3 million compared with $19.5 million for the year ended December 31, 2018. The increase is attributable to the increase in our sales and marketing expenses for the year ended December 31, 2019 compared to the year ended December 31, 2018.

Operating loss for the twelve months ended December 31, 2019 was $17.7 million, approximately in line with the operating loss in the twelve months ended December 31, 2018.

Net loss attributable to holders of common stock was $17.7 million in the twelve months ended December 31, 2019, approximately in line with the net loss in the twelve months ended December 31, 2018.

Non-GAAP billings for the twelve months ended December 31, 2019 were $8.05 million, compared with $8.13 million in the twelve months ended December 31, 2018. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Conference Call Details: Tuesday, March 17 8:30am EDT

Dial-in Number:	1-888-567-1602
International Dial-in:	1-862-298-0702
Webcast:	https://www.webcaster4.com/Webcast/Page/2224/33568

A replay of the call will be available approximately two hours after completion through March 31, 2020. To listen to the replay, dial 1-877-481-4010 (domestic) or 1-919-882-2331 (international) and use replay passcode 33568. The webcast replay will be available through June 17, 2020.

About DarioHealth Corp.

DarioHealth Corp. (Nasdaq: DRIO) is a leading global digital health company serving its users with dynamic mobile health solutions. In today's day and age, knowledge of health and treatment is being democratized, and we believe people deserve to know everything about their own health and have the best tools to manage their condition. DarioHealth employs a revolutionary approach whereby harnessing big data, we have developed a novel method for chronic disease data management, empowering people to analyze and personalize self-diabetes management in a totally new way without having the disease slow them down. DarioHealth has a commercial office in New York with an R&D center in Caesarea, Israel.

For more information, visit http://mydario.investorroom.com/.

Cautionary Note Regarding Forward-Looking Statements

This news release and the statements of representatives and partners of DarioHealth Corp. (the "Company") related thereto contain or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "plan," "project," "potential," "seek," "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" are intended to identify forward-looking statements. For example, the Company is using forward-looking statements in this press release when it discusses that its SAAS-based membership model has the potential for a high margin profile, that it has laid the foundation for potential future growth with expected lower customer acquisition costs, that its strong clinical data suggest best-in-class health outcomes, the belief that the Dario platform producing meaningful clinical data highlights its ability to positively modify user behavior with the goal of better managing chronic conditions for improved health outcomes, the belief that its strong user engagement and clinical data position Dario to be a market leading product, its belief that it is a novel and innovative company in the DTx industry, its intention to focus on making the necessary investments to expand its SAAS based membership model into its B2B2C service offering, which it believes is already reflected in the improved gross profits in the second half of 2019 and which is expected to provide broader patient adoption, more predictable revenue streams, lower customer acquisition costs and higher gross margins, that its best in class management team intends to take its platform to the next level, its intention to continue implementing its disruptive DTx capabilities and working with additional healthcare providers and payers, and its expectation with respect to sharing additional, positive developments in the coming weeks. Readers are cautioned that certain important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking statements that may be made in this news release. Factors that may affect the Company's results include, but are not limited to, regulatory approvals, product demand, market acceptance, impact of competitive products and prices, product development, commercialization or technological difficulties, the success or failure of negotiations and trade, legal, social and economic risks, and the risks associated with the adequacy of existing cash resources. Additional factors that could cause or contribute to differences between the Company's actual results and forward-looking statements include, but are not limited to, those risks discussed in the Company's filings with the U.S. Securities and Exchange Commission. Readers are cautioned that actual results (including, without limitation, the timing for and results of the Company's commercial and regulatory plans for Dario™ as described herein) may differ significantly from those set forth in the forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Non-GAAP Financial Measures

We have provided in this release financial information that has not been prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with peer companies, many of which present similar non-GAAP financial measures to investors.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures provided in the financial statement tables below.

Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period and adjustment to the deferred revenue balance due to adoption of the new revenue recognition standard less any deferred revenue balances acquired from business combination(s) during the period. We consider billings to be a useful metric for management and investors because billings drive future revenue, which is an important indicator of the health and viability of our business. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue.

DARIOHEALTH CORP.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands

	December 31,
	2019		2018
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	20,395	$	10,997
Short-term restricted bank deposits		191		180
Trade receivables		672		168
Inventories		1,414		1,377
Other accounts receivable and prepaid expenses		267		380

Total current assets		22,939		13,102

NON-CURRENT ASSETS:
Deposits		17		43
Operation lease right of use assets		765		-
Long-term assets		200		211
Property and equipment, net		648		733

Total non-current assets		1,630		987

Total assets	$	24,569	$	14,089

DARIOHEALTH CORP.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except stock and stock data)

	December 31,
	2019		2018
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade payables	$	1,656	$	2,574
Deferred revenues		1,223		736
Operating lease liabilities		317		-
Other accounts payable and accrued expenses		2,024		1,854

Total current liabilities		5,220		5,164

OPERATING LEASE LIABILITIES		455		-

STOCKHOLDERS' EQUITY
Common Stock of $0.0001 par value - Authorized: 160,000,000 shares at December 31, 2019 and 2018; Issued and Outstanding: 2,235,649 and 1,831,746 shares at December 31, 2019 and 2018, respectively ***)		**) -		**) -
Preferred Stock of $0.0001 par value - Authorized: 5,000,000 shares at December 31, 2019 and 2018; Issued and Outstanding: 21,375 at December 31, 2019		**) -		-
Additional paid-in capital		129,039		98,179
Accumulated deficit		(110,145)		(89,254)

Total stockholders' equity		18,894		8,925

Total liabilities and stockholders' equity	$	24,569	$	14,089

**) Represents an amount lower than $1.

DARIOHEALTH CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands (except stock and stock data)

	Year ended December 31,
	2019		2018
Revenues	$	7,559	$	7,394
Cost of revenues		4,962		5,629

Gross profit		2,597		1,765

Operating expenses:
Research and development	$	3,692	$	3,676
Sales and marketing		11,127		10,309
General and administrative		5,483		5,468

Total operating expenses		20,302		19,453

Operating loss		17,705		17,688

Revaluation of warrants		-		(1)
Financial expense, net		31		116

Total financial expenses, net		31		115

Net loss	$	17,736	$	17,803

Deemed dividend		3,155		493

Net loss attributable to holders of Common Stock	$	20,891	$	18,296

Net loss per share:

Basic and diluted loss per share)	$	8.00	$	15.63
Weighted average number of Common Stock used in computing basic and diluted net loss per share)		2,266,135		1,170,645

DARIOHEALTH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands

	Year ended December 31,
	2019		2018
Cash flows from operating activities:
Net loss	$	(17,736)	$	(17,803)
Adjustments required to reconcile net loss to net cash used in operating activities:
Stock-based compensation, common stock and stock for salary to directors, employees, consultants and service provider		2,257		3,758
Depreciation		183		207
Change in operating lease right of use assets		368		-
Decrease (increase) in trade receivables		(504)		114
Decrease in other accounts receivable and prepaid expenses and Long-term assets		124		13
Increase in inventories		(37)		(193)
Increase (decrease) in trade payables		(918)		722
Increase in other accounts payable and accrued expenses		371		977
Increase in deferred revenues		487		736
Change in the fair value of warrants to purchase shares of Common Stock		-		(1)
Change in operating lease liabilities		(320)		-

Net cash used in operating activities		(15,725)		(11,470)

Cash flows from investing activities:
Investment in deposit		(15)		(1)
Purchase of property and equipment		(98)		(71)

Net cash provided by (used in) investing activities		(113)		(72)

Cash flows from financing activities:
Proceeds from issuance of Common Stock in 2019 Public Offering and Preferred Stock in 2019 and 2018 private placement, net of issuance cost		25,247		18,743

Net cash provided by financing activities		25,247		18,743

Increase in cash, cash equivalents and short-term restricted bank deposits		9,409		7,201
Cash, cash equivalents and short-term restricted bank deposits at beginning of year		11,126		3,925

Cash, cash equivalents and short-term restricted bank deposits at end of year	$	20,535	$	11,126

Reconciliation of Revenue to Billing (Non-GAAP)
U.S. dollars in thousands

	Year Ended December 31,		Three Months Ended December 31,
	2019	2018	2019	2018

GAAP Revenue	7,559	7,394	1,798	1,700
Add:
Change in deferred revenue	487	736	(88)	351

Billing (Non-GAAP)	8,046	8,130	1,710	2,051